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Interchange rule even with two tiers harms CUs CUNA

WASHINGTON (1/11/11)—Pending interchange fee rule changes will create issues for both credit unions and their members, as well as consumers in general, whether a two-tier fee system is followed or not, the Credit Union National Association (CUNA) has again warned. It has been widely reported in recent days that Visa plans to follow a two-tiered interchange fee structure when and if the interchange fee regulations take effect later this year. Visa representatives, when contacted by News Now, said they did not wish to comment on the reports. Under the two-tiered fee system, credit unions and other financial institutions with over $10 billion in assets would be required to limit the interchange fee charged on individual purchases. This fee could be as low as seven cents per transaction under one plan released by the Federal Reserve. Credit unions and other institutions with under $10 billion in assets would not be subject to this fee limit. However, nothing in the Fed’s proposal, which was released late last year, provides an enforcement mechanism to ensure that the two-tier fee schedule is followed. CUNA Chief Economist Bill Hampel has said that market forces would likely erode the gap between the two tiers over time. Overall, smaller institutions such as credit unions could lose revenue due to the interchange changes, a circumstance that may force credit unions to increase member fees or reduce the amount of services they offer to those members, CUNA has said. CUNA and several congressional representatives have called on the Fed to hold hearings to review the interchange fee proposal.